Post-FTX crypto industry needs education before regulation: Former Biden adviser
The cryptocurrency industry must prioritize investor education over strict regulations as it recovers from the collapse of the FTX exchange, which lost $8.9 billion in user funds.
According to Moe Vela, a former senior advisor to President Joe Biden and senior advisor to UniCoin, financial education, especially when it comes to risk management, should be a fundamental concern of the crypto industry.
Vela told Cointelegraph in an exclusive interview.
“Education is the fundamental key to empowerment…Until we have economic equality, we will not have equality in any form. We will not have economic equality until we educate people about anything that is sophisticated, sophisticated and comes through education.
The senior adviser's comments come a week after FTX's revised proposal was released on May 7, which promised “billions in compensation” to defaulting exchange users and creditors from November 2022.
The meltdown of FTX and its more than 130 subsidiaries forced regulators to take action and develop investor safety-oriented regulations, and the United States Securities and Exchange Commission (SEC) began cracking down on crypto exchanges to avoid another FTX-like meltdown.
However, rather than regulatory efforts that could stifle digital asset innovation, Vella argued, the industry would benefit more from educating unsophisticated investors:
“To my fellow Democrats, a little to the left of me, who are a little too zealous for regulation: Stop it. You're not doing anyone any favors. Because you think you're protecting the unsophisticated investor, but you have to overcontrol to protect the unsophisticated investor, it can make you feel better. Why don't we make the investors complex?
Vela serves as an advisor to Unicoin, an asset-backed cryptocurrency that aims to reduce the volatility associated with traditional cryptocurrencies. During the token's launch, Vela realized that risk reduction was among the most important factors for both traditional and crypto investors. He explained.
Related: Regulators are cracking down on financial privacy, but ZK-proofs can help.
The crypto industry is here to stay and regulators take note
As the crypto industry becomes part of our future, innovation-friendly regulations are a key priority, Vella said.
“How can we create regulation that empowers, protects and educates? But it does not hinder the growth of this sector. Because this industry is here to stay. It is a vital part of our world's future…so let's promote smart growth and secure growth.
In the wake of FTX's collapse, crypto exchanges have been pushing for more transparent operations, led by Binance, the world's largest exchange, which cannot escape the hawkish stance of the SEC.
In June 2023, the SEC sued Coinbase and Binance Exchange for securities violations. In its lawsuit against Binance, the SEC alleged that the company and its founder, Changpeng Zhao, misappropriated billions of users' funds.
Despite no evidence of misuse of user funds, Binance was accused of violating anti-money laundering laws and ordered to pay $4.3 billion.
This type of regulatory enforcement is antithetical to the innovation-friendly approach advocated by Vela:
“What I preach is a rule that protects and prohibits, not paralyzes and destroys.” [innovation]He said.
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